Skip to main content

Search

Truth in Lending: 10.7.1 Overview

After the proceeds of the transaction have already been disbursed, creditors are often reluctant to follow the law in responding to a notice of the right to cancel received from a homeowner.

Truth in Lending: 10.7.2.1 Basic Provisions and History

Both the statute and Regulation Z make clear that, if the consumer has the extended right and chooses to exercise it, the security interest and obligation to pay charges are automatically voided—period.1132 The statute, section 1635(b), states: “When an obligor exercises his right to cancel, . . . any security interest given by the obligor . . .

Truth in Lending: 10.9.3.2 Maximizing Statutory and Actual Damages in Rescission Cases

Practitioners should be sure to evaluate the case carefully to assure that all damages to which the consumer might be entitled are properly calculated. This is especially important if the consumers anticipate financial difficulty in making tender, as damage awards may offset much of the tender amount. Statutory damages are “capable of mathematical calculation,” but the plaintiff should be entitled to a hearing on actual damages.1458

Truth in Lending: 10.9.3.3 Statutory Damages Against Assignees for Rescission Violations

A few courts have held that an assignee who rejects or ignores the consumer’s rescission is not liable for statutory damages unless the disclosure violations on which the rescission is based are apparent on the face of the documents.1467 These courts reason that section 1640(a) only imposes statutory damages liability on “any creditor,” which is defined by section 1602(g) as the entity to which the obligation was originally payable.

Truth in Lending: 10.9.4 Attorney Fees

Attorney fees are available in rescission cases.1476 A few courts have held, however, that attorney fees are available against an assignee in a rescission case only if the underlying violation was apparent on the face of the contract.1477 These courts reason that, while rescission is always available against an assignee by virtue of section 1635(c), the right to attorney fees arises under section 1640(a), which makes them available against a “creditor” who fails to comply with TILA.

Truth in Lending: 10.9.5.3 Equitable Modification

Since negating the consumer’s tender obligation because of the creditor’s noncompliance is inherent in Steps Two and Three in the rescission process, it is clear that courts have the equitable authority to modify it.1504 While the better rule is that the tender obligation should be negated unless the creditor shows some special equities in its favor,1505 courts typically make this remedy an exception rather than the rule, and confine it to cases involving deception, cheating, or overreac

Mortgage Servicing and Loan Modifications: ALASKA

Alaska Stat. § 34.20.050

Requirements: After ten days written request to discharge, mortgage holder who refuses or neglects to discharge is liable for $300 damages plus any damages resulting from refusal or neglect.

Mortgage Servicing and Loan Modifications: ARIZONA

Ariz. Rev. Stat. Ann. § 33-712

Requirements: Any person receiving satisfaction of mortgage is liable for actual damages upon failure to record within thirty days; after continuing failure for a further thirty days following a written request, liability is for $1000 plus any actual damages. Mortgagor may obtain payoff deed from a title insurer in specified manner if mortgage holder (including “account servicing agent”) fails to provide such after sixty days from date of full payment. § 33-750.

Mortgage Servicing and Loan Modifications: CALIFORNIA

Cal. Civ. Code § 2941 (West)

Requirements: Mortgagee or assignee receiving satisfaction of mortgage is liable for actual damages and $500 upon failure to record within thirty days or, after recording, failure to honor written request to deliver original note to mortgagor. Cf. § 2943.1 as to equity line of credit after July 1, 2015.

Mortgage Servicing and Loan Modifications: CONNECTICUT

Conn. Gen. Stat. § 49-8

Requirements: If release is not delivered within sixty days of satisfaction, mortgage holder is liable the greater of actual damages or $200 per week after the sixty-day period up to a maximum of $5000, plus costs and attorney fees. Mortgagor may have satisfaction recorded by duly appointed officer if mortgagee fails to record such within sixty days of payment. § 49-8a.

Mortgage Servicing and Loan Modifications: GEORGIA

Ga. Code Ann. § 7-1-1013(4)

Requirements: Improper refusal to issue a satisfaction of loan is a prohibited act. Violation is misdemeanor subject to imprisonment or fine no greater than $1000. § 7-1-1019.